The debt to equity ratio is measure of leverage. It shows how much debt a company has relative to its equity. Meaning, the debt-to-equity ratio shows how much debt a company is taking on in order to run its operations opposed to using its own funds.
Debt to Equity = Total Liabilities/Total Shareholders' Equity
example: Company A has total liabilities of $200 and a total shareholders' equity of $250
$200/$250= Debt-Equity of .8
What this says, is that for every $1 of equity Company A has 80 cents of debt.
Debt to equity is helpful for investors when assessing a company's risk exposure. Usually, the higher the debt to equity ratio the more risky an investment in a company may be. A low or declining debt to equity is preferred.